Central and Eastern Europe: The New DTH Wild West

In the September edition of Via Satellite, we have an in-depth article looking at the European broadcast landscape. Here, in an extra, bonus article, we turn our attention to Central and Eastern Europe and look at the broadcast dynamics here and the role that satellite players can play in the emerging region for satellite TV. The article is part of a new Via Satellite extra series.

Central and Eastern Europe is seeing some very interesting dynamics in terms of broadcasting. It is host to some extremely large and lucrative markets such as Russia, Ukraine, Romania and Poland. In markets such as Romania and Poland, there are now multiple DTH platforms meaning it is a vibrant market for satellite players. For example, Poland has a population of close to 40 million people, and already has three established DTH platforms, Cyfra+ Cyfrowy, Polsat and ‘N’. Russia has a population of over 140 million people, making it Europe’s single largest market and a potentially great opportunity for satellite players in the broadcast arena. Ukraine has a population of close to 50 million people and over the last year, players such as Vision TV and Poverkhnost are looking to tap into the satellite pay-TV market here. Even a country like Romania, which has a population of a little over 20 million people, contains numerous DTH platforms with players such as the incumbent telco, RomTelecom active participants in the DTH market here. Everywhere you look in the region, satellite is prevalent in the broadcasting market, with interesting strategies across different markets.”

Vision TV

One of the new platforms that launched this year was Vision TV, a new DTH platform in Ukraine. Rich Caproni, Vision TV general director, believes the opportunity in this market is “enormous” for the platform. He said, “The growth potential is enormous. You have over 17 million households in Ukraine and not many TV options for the population. According to the cable union, there are around seven million households in the area of cable networks leaving at least 10 million whose options are very limited. So, there is a huge opportunity for satellite. Our positioning is not to come in as an exclusive service, or as a premium service, but to target middle class Ukrainian households, which is a much wider target market but still a limited number of people due to the economic situation in the country.”
In terms of why Ukraine is well-suited to satellite, Caproni added, “Ukraine is an extremely difficult working environment. The country has a long way to go in terms of implementing and enforcing a proper market economy infrastructure. That environment itself is likely to slow things down as it has slowed down development of just about every other sector in the country. But, when it comes down to it, a market of this size is exciting. There is huge potential for new subscribers, probably the biggest in Europe.”

Concentration Phase

A number of players are now targeting Central and Eastern Europe for growth. Stéphanie Villaret, a media analyst at French-based consultancy, IDATE, commented, “The satellite TV market in Western Europe is mainly mature and highly concentrated (1 or 2 DTH packages per country on average). In Central and Eastern Europe, we see a situation where there can be up to four DTH packages per country, especially in countries such as Poland, Romania, Russia, or Ukraine. However, IDATE analysts estimate there will likely be a concentration phase in a few years, as this situation is not sustainable on the long term.”
Roger Bolton, VP of business development at Tandberg Television says, “There are more platforms launching in Eastern Europe. Poland, Romania and Bulgaria are seeing a number of new platforms. I guess when the infrastructure is very weak, the satellite operators can get up there pretty quickly with services that IPTV and cable might have trouble emulating.”

Different Niches

The dynamics for DTH in Central and Eastern Europe are some of the most interesting around. Nick Thompson, managing director of Arqiva’s satellite media solutions division, added, “At the moment satellite is a much more affordable platform than it was in the early days of Western European satellite platform developments. As a result, it is a lot easier than it was to launch a platform and we are seeing an increase in the number emerging in countries such as Romania and Poland. Furthermore, players are carving out different niches for their platforms – some packaging themselves as high-quality, high-value subscription content providers, and others as pay-as-you-go platforms.”
Arqiva hopes to play more of a role in this market. Thompson added, “It is Arqiva’s aim to play a role in Central and Eastern European satellite platforms, either through distribution or media management and playout. We want to create TV channels, which are unique for those particular markets, just as we are already doing.”
Cato Halsaa, CEO of Telenor Satellite Broadcasting (TSB) is also optimistic about the potential growth opportunities for satellite players in Central and Eastern Europe. He said, “It is clear that there are different dynamics, explained by the different levels of maturity. Generally there would appear to be more competition and attempts to ‘land grab’ through heavy discounting in Eastern European markets.
He added, “The favorable market conditions in Central and Eastern is set to continue to create a real opportunity for growth. TSB is currently well placed to serve this market due to our already established position within the region. 1 West is a growing CEE hotspot and with the combined transponders of Thor 5 and Thor 6, we will effectively be doubling capacity to ensure we have a strong growth plan to be able to facilitate this continued demand.”

Attention

For content providers, the proliferation of a number of new pay-TV platforms in the region is a huge opportunity. With new DTH platforms emerging regularly, as well telcos looking to play in the IPTV space, it has never been a better time for a content player to do deals in the region. Bhavneet Singh, managing director and executive vice president, emerging markets, MTV Networks International said the Eastern European TV market was now at a “crossroads”. He said, “It is only going to get better. Over the past two years or so, as a region, it has definitely been catching the attention of the world, and it is now starting to catch up with the likes of Western Europe. Poland and Turkey, for example, are countries with already significant annual ad revenues. Looking forwards, TV revenue from Eastern Europe is set to double to $12 billion by 2013 according to latest reports, with the Czech Republic, Poland and Hungary leading the way. Media spend is growing four times as fast in Eastern Europe versus Western Europe and adding five million broadband users a year.”
In terms of why the region has suddenly become really attractive to a number of broadcast players, Singh added, “I think that what is driving this growth is the stable economic conditions in almost all of the countries in Eastern Europe. This means that there is more marketing and advertising money wanting to find a home in the region, and this means that broadcasters have moved away from being largely dependent on imports and are now moving more and more to local production, which is always far more popular.”
A smooth move to digital is also helping. “The region as a whole is moving into digital very quickly and very cleanly. Different media platforms have evolved and are now more widely available and Eastern European audiences are becoming more and more discerning. All of these elements represent good opportunities in the region. However, it doesn’t stop there. The countries themselves and the diversity of cultures across Eastern Europe also means that this region has a great deal to offer international companies looking to expand or set up shop there,” noted Singh.

IPTV

With so many DTH platforms emerging in the region, Singh is unsure what impact IPTV will have in Eastern Europe. He says, “In terms of IPTV, the impact of IPTV varies according to the dynamics of the local market. In places where the cable and satellite market is extremely consolidated and has been static for some time, such as in the Czech Republic, IPTV has the potential to be a significantly disruptive influence. In other markets, where digital cable and wideband DTH are already well penetrated, we expect IPTV to remain a niche product. But what’s interesting about IPTV is that it tends to be offered by telecom providers as part of triple or quad play – and we can see some very interesting opportunities here to strike up multimedia deals with these operators.”
Singh is optimistic that the broadcast landscape in Eastern Europe will continue to be a very dynamic one over the next few years. He added, “If you look at markets in Central and Eastern Europe like Poland, they’re already comparable in scale to some Western and developed economies and in some cases, such as digital penetration, they’ve actually surpassed and leap-frogged certain Western countries. Central and Eastern Europe’s increasingly sophisticated consumer consumption will continue to drive dramatic growth in the region and the region is rapidly establishing itself as a key player in the international media landscape.”

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